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Maxima Corp. uses a standard cost system with machine-hours as the activity base for both variable...

Maxima Corp. uses a standard cost system with machine-hours as the activity base for both variable and fixed manufacturing overhead (VMOH & FMOH). The following information relates to production for last year:

Variable Fixed
Total budgeted overhead (at the denominator level of activity) $14,000 ?
Total applied overhead $15,400 $28,600
Total actual overhead $15,700 $31,800

The actual machine-hours incurred were 2,300. VMOH Efficiency Variance was $700 Unfavorable.

What was Maxima's FMOH Volume Variance?

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Answer #1
Variable Overhead applied = standard rate * actual hours
$15400 =standard rate * 2300 hours
Standard Rate =6.6957
Budgeted hours = Budgeted Overhead /* standard rate
=$14000/6.6957
=2091 hours
Standard Rate for fixed overhead = $28600/2300
=$12.43478
Budgeted Fixed overhead =$12.43478*2091
=$26000
Fixed overhead volume variance = Overhead Incurred - Budgeted Overhead
=$26000-28600
=$2600 ( Favorable)
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